Correlation Between NVIDIA and Leef Brands
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Leef Brands at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NVIDIA and Leef Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Leef Brands, you can compare the effects of market volatilities on NVIDIA and Leef Brands and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NVIDIA with a short position of Leef Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Leef Brands.
Diversification Opportunities for NVIDIA and Leef Brands
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NVIDIA and Leef is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Leef Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leef Brands and NVIDIA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NVIDIA are associated (or correlated) with Leef Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leef Brands has no effect on the direction of NVIDIA i.e., NVIDIA and Leef Brands go up and down completely randomly.
Pair Corralation between NVIDIA and Leef Brands
Given the investment horizon of 90 days NVIDIA is expected to generate 2.03 times less return on investment than Leef Brands. But when comparing it to its historical volatility, NVIDIA is 4.03 times less risky than Leef Brands. It trades about 0.15 of its potential returns per unit of risk. Leef Brands is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Leef Brands on August 25, 2024 and sell it today you would earn a total of 5.00 from holding Leef Brands or generate 45.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Leef Brands
Performance |
| Timeline |
| NVIDIA |
| Leef Brands |
NVIDIA and Leef Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Leef Brands
The main advantage of trading using opposite NVIDIA and Leef Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Leef Brands can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Leef Brands will offset losses from the drop in Leef Brands' long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| Leef Brands vs. Hasbro Inc | Leef Brands vs. Emerson Radio | Leef Brands vs. Playtech plc | Leef Brands vs. Cumberland Pharmaceuticals |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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